Question: suppose that the demand and supply functions for good x...
- Suppose that the demand and supply functions for good
Qd = 56 – 2PX + 0.01M +7PR
Qs = -600 + 10PX
Where PX is the sales price of good X, M is average consumer income, PR is the price of a related good.
- Is good X a normal or inferior good?
- Are good X and R complements of substitutes? Explain?
Suppose M = $50,000 and PR = $20
- What is the direct demand function for good X?
- What is the equilibrium price and quantity?
- What is the market outcome if M rises to $60,000, other things being equal?
- What is the market outcome if price is of good PR is decreases to $14 other things being equal (M= $50,000?
- What happens to equilibrium price and quantity if the supply function becomes QS = - 360 + 10PX, for the original demand function and the original values for M and PR?